Quarterly data from U.S. Bank, one of the largest processors of trucking invoices in the country, could suggest a balance between supply and demand is on the horizon.
The two key outright numbers produced by the U.S. Bank Freight Payments Index are for shipments and spend. Both declined relative to the third quarter. The Shipments Index value was 95.0, down 10.9% from the prior-quarter figure of 106.6.
The Spend Index was 233.9. That was down just 1.4% from the previous quarter but down 13.5% from the corresponding quarter of 2022. The Spend Index does include diesel spending, which U.S. Bank said was 15.5% less than a year earlier, based on its data.
In what might be considered the most accurate summation of the current market, the U.S. Bank commentary said: “As shipments volumes contract, it results in too many trucks chasing too little freight.” But the bank also noted that given that the Shipments Index was down 10.9% and the Spend Index dropped just 1.4% relative to the third quarter, that variance is “suggesting that the market may be moving closer to balance between supply and demand.”
The difference in those numbers, with spending down less than shipments, “suggests that there were some reductions in freight capacity in the industry, keeping costs higher,” the bank wrote. “Motor carriers, especially those exclusively in the spot market, have been under tremendous pressure between falling freight rates and rising costs.”
The U.S. Bank Index differs from some other indices in that it is a chained index. Other indices that start with a base of 100 at a certain point reflect changes that are relative to that base. But as U.S. Bank describes it, a chain index number for a three-month period “represents that quarter’s volume in relation to the immediately preceding quarter.”
“Our index shows the change in velocity and direction of the shipments and spend,” a U.S. Bank spokesman said in an email to FreightWaves. “The comparison to the previous quarter shows a drop or rise in the amount of change. The YoY comparison just gives an idea of how activity in the market has progressed from the velocity it had last year.”
The U.S. Bank Freight Payment Index uses the invoices processed by the bank as its basis for calculations. According to the bank, “the source data is based on our highest-volume domestic freight modes of truckload and less-than truckload.” It is also seasonally and calendar-adjusted.
U.S. Bank said in its commentary on the numbers that shipment volumes had declined during the final quarter of the year because of retailer destocking.
“As businesses worked to reduce inventories, they required fewer truck shipments,” U.S. Bank said. “Furthermore, shelf destocking reduces total economic activity; the reduction in inventory, once completed, will no longer be a headwind on the freight supply chain. Bringing inventories into balance will be better for motor carriers in the months and quarters ahead as retailers and other businesses will require additional products to be delivered by trucks and can’t simply pull from existing inventory.”
U.S. Bank also breaks down the data regionally. While there were differences in the rate of change in the five regions the bank tracks — Northeast, Southeast, Southwest, Midwest and West — the direction of the changes were negative for both spend and shipments in all five regions, except for the spend figure in the Midwest, which was up 1.2%, and spend in the West, which rose 0.2%.
The Southwest was one of the weakest performers, with the Shipments Index down 18.2% from the third quarter and the Spend Index down 2.7%.
“Retail and home sales fell during the first half of the fourth quarter, weighing on truck freight volumes,” the bank said in its commentary. “Additionally, cross-border truck transportation continued to grow, but at a slower pace during the fourth quarter.” It cited federal data that said inbound trucks from Mexico were up just 3.2% from the third quarter and 2.2% from a year earlier.
For the other regions:
West: Shipments down 2.9% from the third quarter, spend up 0.2%. “Many trends have negatively impacted freight on the West Coast over the last several quarters,” the bank said in its commentary. “Mexico has supplanted China as the United States’ largest trading partner, which has squeezed import volumes coming into West Coast seaports. However, the good news is during the final quarter of the year, import volumes at West Coast seaports improved overall, especially compared with a year earlier.”
Midwest: Shipments down 8.6%, spend up 1.2%. “This region has seen lower freight volumes in recent history for many reasons, including soft manufacturing, changing consumer spending and weaker housing activity.”
Northeast: Shipments down 9.4%, spend down 2.5%. The bank cited several reasons: lower consumer spending in the New York metropolitan area, nonauto retail sales declining in the Philadelphia region along with reduced manufacturing, and lower restaurant and clothing sales in New England.
Southeast: Shipments down 14.5%, spend down 4.1%. The combination of consumers spending more on experiences, and cooling, albeit still solid, labor markets put some downward pressure on retail spending in the region last quarter.
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